The great Russian private-equity gamble

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The great Russian private-equity gamble

It's difficult to make money in Russian private equity. Consequently, many of the world's biggest funds have steered clear. For those that have taken the plunge, the results are mixed. Some report returns far higher than those on equities. Others have had no luck and have packed up and left.

By Alex Fak


Lady luck

IN A CITY where overpriced service is usually either rude or unctuous – never anything in between – Prime stands out. The Moscow sandwich outlet is modelled on the UK's Pret A Manger chain, most of its sandwiches cost less than R100 ($3.50), and the service is quick and cheerful. A sign says that it will make any sandwich on the menu within 10 minutes.

What makes Prime intriguing is that, in a city centre teeming with young professionals, it has no obvious close competitors. Restaurants down the road insist that the visitor sits down, and similar fare to Prime's is nearly five times the price.

But it's not just Russia's hungry professionals who are impressed by Prime. The company is proving a hit with Delta Private Equity Partners, one of the country's more innovative and impressive private-equity players. In March, Delta bought a blocking stake in Prime (anything between 25% and 50%), which means that it can veto some of the Prime management's big decisions but can't dictate overall strategy.

Prime fits Delta's strategy of identifying and funding growth companies in Russia. The firm was established in 1998 primarily to manage the $440 million US-Russia Investment Fund.


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